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Risks to Consider when buying a Commercial Property

There are several risks associated with buying commercial property.

1. Vacancy:
Your property may not be fully occupied, which can impact your ability to generate rental income. To mitigate this risk, consider properties in locations with strong demand for commercial space, and consider offering incentives to tenants to encourage occupancy.

2. Market:
The value of your property may fluctuate due to changes in the local real estate market. To alleviate this risk, it’s important to do your due diligence and research the market before making a purchase.

3. Property condition:
The property you purchase may have hidden defects or require unexpected repairs, it is important to have the property inspected by a professional before making a purchase.

4. Tenant risk:
Your tenants may default on their rent payments or damage the property, it’s important to carefully screen tenants and require a security deposit.

5. Interest rate:
If you finance your commercial property purchase with a mortgage, there is a risk that interest rates may rise, which can increase your monthly payments and impact your profitability. Consider locking in a fixed interest rate or using a hybrid loan with a combination of fixed and adjustable rates.

By carefully considering these risks and taking appropriate precautions, you can increase the chances of success with your commercial investment property in Australia.

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